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Indonesia Q2 Growth Falls Below 6%

Indonesia Q2 Growth Falls Below 6%
8/2/2013 3:39 AM ET

Driven by the weakness in investment and household spending, Indonesia's economic growth fell below 6 percent in the second quarter, official data from Statistics Indonesia showed Friday.

Southeast Asia's largest economy expanded only 5.81 percent year-on-year in the second quarter, after logging a revised 6.02 percent growth in the preceding three months. The pace of growth was the slowest in three years and also weaker-than the 6 percent expansion forecast by economists.

On a quarterly basis, gross domestic product growth came in at 2.61 percent, above the previous quarter's revised 1.42 percent growth, but below the consensus forecast of 2.75 percent.

Data today showed that momentum in household spending, one of the biggest contributor to the economic output, and investment slowed in the second quarter.

Investment advanced at a slower pace of 4.67 percent annually, following a 5.78 percent rise a quarter ago. Likewise, the increase in household spending slowed to 5.06 percent from 5.17 percent. On the other hand, government spending growth improved to 2.13 percent from 0.42 percent.

Bank Indonesia faces challenges from high inflation and low economic growth with the currency trading at a low level due to huge fund outflow from the country. The central bank lifted interest rates twice this year, to contain inflation driven by higher fuel prices.

Citing the bleak prospects for external demand in the near future, the Bank Indonesia recently lowered its 2013 growth forecast to 5.8-6.2 percent from the earlier projection of 6.2-6.6 percent.

In July, the World Bank downgraded its 2013 growth forecast for the Indonesian economy to 5.9 percent from the earlier estimate of 6.2 percent, taking into account slower recovery in exports and moderation in domestic demand.

Indonesia's trade deficit widened to $850 million in June, due to a 4.5 percent fall in exports, data showed Thursday.

According to the recent Purchasing Managers' survey, output in the Indonesian manufacturing sector stagnated in July, ending a four-month expansionary sequence. Despite the weakness in currency, export business fell for the second consecutive month.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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